Families Figuring Out How To Pay For CollegeIt's decision time for high school seniors who've applied to college and received acceptance letters. And as tuition levels rise, especially at top-level private schools, a growing number of financial experts are warning students to steer clear of student loan debt.

Guests

Jacques Steinberg, education reporter, New York TimesAlisa Cunningham, vice president of research and programs, Institute for Higher Education Policy

It's decision time for high school seniors who've applied to college and received acceptance letters. And as tuition levels rise, especially at top-level private schools, a growing number of financial experts are warning students to steer clear of student loan debt.

LYNN NEARY, host:

This is TALK OF THE NATION. I'm Lynn Neary in Washington. Neal Conan is away.

By now most high school seniors who've applied to college have gotten the news: they're in, or not. For those who got accepted at more than one college - it's decision time. And for many, the deciding factor may be money. As the price of college continues to soar, figuring out how to pay for it is becoming more and more crucial. It often involves putting together a package of financial aid, scholarships and loans. And that gets even more complicated as a growing number of financial experts warn students to steer clear of student loan debt.

New York Times education reporter, Jacques Steinberg, editor of The Choice blog joins us in moment to answer your questions; and Alisa Cunningham, of the Institute For Higher Education Policy joins us later in the program to talk about the risks of student loan debt.

Parents and students, if you are facing these decisions, give us a call. What's your financial strategy? Cheaper schools, loans, your retirement account? Our number here in Washington is 800-989-8255, the email address is talk@npr.org. And you can join the conversation at our website. Go to npr.org and click on TALK OF THE NATION.

Jacques Steinberg joins us now from our bureau in New York. He is the editor of The Choice blog at The New York Times, and the author of "The Gatekeepers: Inside the Admissions Process of a Premier College." Welcome to the program.

Mr. JACQUES STEINBERG (Education Reporter, New York Times; author, "The Gatekeepers: Inside the Admissions Process of a Premier College"): Thanks very much, Lynn.

NEARY: So a lot of students may have gotten into their dream school, and at this moment they're starting to think about whether they can afford it, or should they have sorted that out beforehand, or are they actually making those decisions at this moment now that they know what schools they got into?

Mr. STEINBERG: Yesterday was sort of the big day. At 5 o'clock yesterday the Ivy League colleges made their decisions available. And obviously, these are just eight of 2,000 four-year colleges in this country, but they among the last and among the most competitive. But it's only now that, you know, as they sort of sift through these offers that the students and their families are having a better sense of what the financial aid package is looking like. So there's really only so much they could have done before yesterday.

NEARY: So why is it - why does it to get to this point, that you're accepted and now you're looking at the financial aid package, instead of knowing that beforehand to begin with?

Mr. STEINBERG: I mean, the way the system is designed, you know, you oftentimes find out what the financial aid offer is around the same time as you find out whether you've been accepted, rejected or wait-listed. Obviously, if you've been rejected or wait-listed, you don't really know what the finances would be. But it really doesn't come into focus until now and you have this period between now and May 1st to sort of sort through your decisions.

NEARY: OK. So, as you were saying, the sort of most prestigious schools or the very competitive schools have finally announced. Now some of these schools actually give out the most financial aid. Is that right?

Mr. STEINBERG: It's a little bit counterintuitive. Over the last few years, the colleges - the Ivy League and some of the other most prestigious colleges, most competitive colleges in this country have sweetened the pot a little bit, particularly for families whose income is under $100,000 and under $60,000. For some of those families, as crazy as it sounds, sometimes a Harvard or a Brown or a Princeton education could be less expensive than a state university.

The problem, of course, is that most of us fall into that great middle where there is very little need-based aid, and for us - for those families these educations only get more expensive and more complicated to pay for every year.

NEARY: And it's also true, apart from some of these obviously very well known -the Ivy League schools - a lot of small private colleges also give out pretty good packages. Is that right?

Mr. STEINBERG: It depends. It can be hard to generalize again. I hate to keep repeating this number, but we as a society and as parents and as kids tend to forget that - sometimes to talk in some communities or to listen to some families, you would think there were only two dozen colleges in this country. And as I said, 2,000 is a big number and within that 2,000 there is a huge range and not just in terms of what is offered but as you say, in terms of financial aid packages.

A couple of weeks ago we learned that a college call Sewanee in the South was going to slash its tuition across the board for next year - a very bold decision with the hope that other college would follow its lead. I'm sure there's going to be a lot of interest in Sewanee next year.

NEARY: Now, a phrase that new to me, and I think this is different than financial aid. You can explain this to me if it isn't, but that is the idea of tuition discounting. What is that exactly?

Nr. STEINBERG: It's, as you say, this becomes complicated and the jargon a little bit - it can get a little confusing. But this idea of who is -relatively few people in some of these instances are paying the full tuition price; the tuition price that is listed on the website. And I think that was one of the things that Sewanee was trying to address. Let's have some transparency. Let's cut that tuition price across the board so that everybody in effect is getting that discount, and it becomes nullified.

NEARY: Yes, I don't where the place - the article I was reading about this -compared this idea of tuition discounting to airplane fares, meaning that not everybody's paying the same price to fly across country. Everybody on the plane has a different fare. And that can be very similar to school, that people are really paying a different tuition.

Mr. STEINBERG: It can be. And the fact is that if we steer the conversation back to that applicant or family who now has these letters in front of them. These sorts of definitions or who's paying what, they want to make it personal and you absolutely should ask questions like these of the financial aid office. And you should also particularly ask if there's wiggle room. You've offered me a particular amount; I may have had a change in my family circumstance since I applied for that financial aid. Is there anything that can be done?

NEARY: So you negotiate?

Mr. STEINBERG: You know, I would advise not to approach it like a car dealer. Certainly the colleges think that they're better than that, and you want to approach it, they would hope, with a certain degree of decorum. But they would certainly call it an appeal, and families should not be afraid to have it explained and particularly if there's a difference between one school and another. I personally don't think there's anything wrong with saying to college A: You know, college B offered this, and I'm not quite sure I understand why that's not something you're offering. You don't say it in sort of a threatening way, but who knows, they might match.

The key difference to know is that merit aid is different than need-based aid. Merit aid may have nothing to do with your family income, and everything to do with how your child performed on a test like the PSAT or in school. And if a school offers you merit aid, it's hard to compare that to a college that doesn't offer merit aid, because they are only basing it on need. So that's the only area you have to be careful. Merit versus need and does the college offer both or only one?

NEARY: And merit aid is really a scholarship for a...

Mr. STEINBERG: It's rewarding you for your performance and if you go to a school that doesn't offer merit aid, that only gives scholarships based on need, and you say: Boston University has presented my child with a $20,000 scholarship; it's merit based, match it. That college that only offers need will say, we can't. We don't offer scholarships based on performance. And yet, what's the harm in asking for a little bit more, if that truly could make the difference?

NEARY: All right. Let's take a call from Sochi(ph) in Texas. Sochi?

SOCHI: Hi, how are you?

NEARY: I'm good, go ahead.

SOCHI: Well, I was just explaining that my little brother is a senior right now, and he's been getting all his letters; they've all come in and last week he got his letter from his dream school, which is Rice, here in Houston. And he was so excited. It was just wonderful news until we got the aid packet and Monday morning we're looking at the aid packet, my parents and I - and since I'm a former high counselor - we looked at it together. And we thought, great, he can't go to Rice, you know. And so his dreams were shattered for temporary and finally my parents, you know, I told them, advised them, you need to talk to the financial aid counselor. When they initially called the admissions office to set up an appointment with financial aid, the guy in admissions said, well, he should be happy with what he got. And not understanding that - just because most of the students who go to Rice come from affluent families, they're quite a few who come from families who are in great need.

Well, the best case scenario has worked out. My parents talked to the financial aid counselor, directly there. They kind of redid everything, kind of looked at the situation; the fact that my little sister's a junior at A & M, and now he's going to go to Rice. We still have to look at loans - probably about $5,000 a year in loans, but when you compare that to $45,000 a year that Rice costs, you know, we can make that sacrifice if we have to, just knowing that this is finally - you know, he's worked so hard in his school and he's going to get what he deserves.

It was just kind of scary there for that, you know, couple of days where we thought, OK, now we have to find choice B or C; which were wonderful schools as well, but, you know, we want him to go where he feels comfortable and to go for where he really feels that he's going to do well.

NEARY: Well, I'm glad that had a happy ending. I wasn't sure it was going to, so thanks for calling in...

SOCHI: Thank you.

NEARY: ...and sharing that story for me.

Mr. STEINBERG: But I think, Lynn, I think Sochi's story is really instructive. Of course, it doesn't always end with a happy ending. But what if they hadn't asked? What if they had stopped at that financial aid counselor who said, oh, he should be happy? And it sounds like, again, they did it in a diplomatic way, they didn't do it in a confrontational way. But they were persistent and I think there's something instructive in that.

NEARY: But I was also struck by listening to her, is that she's pretty savvy. She was, or is, a school counselor. So she knows about this. I mean, she knows how to approach this, I...

Mr. STEINBERG: But it also - they will break it down for you. I don't think you have to be a school counselor necessarily to get to that next level, to talk to the proverbial supervisor, as it were, to ask for an explanation and an appeal.

NEARY: And it sounds like they did - and we're going to get into loans in a moment, in the next segment of the program - but it sounds like they did what a lot of people have to do, is you put together a - it sounds like you put together a kind of package of things in order to come up with the huge amount that tuition is.

Mr. STEINBERG: Yeah, it's going to be a combination and obviously, as you'll talk more in your next segment, you want that loan amount to be as little as possible and the direct aid to be a high as possible.

NEARY: And what about kids who aren't going to get the merit scholarship? We were talking about that before and I wanted to follow up. I mean, there's a lot of kids that, you know, they're just going fold - they're good enough but they're not going to get a scholarship.

Mr. STEINBERG: It's - I mean, then you've got decisions to make. First of all, there are two wonderful websites called thinaid.org and fastweb.com, where you've got scholarships that may not necessarily be attached to the schools themselves. And that is certainly one place to start, but you've also got to make the decision; maybe community college for two years.

(Soundbite of music)

NEARY: Mmm. We're talking about how to pay for college. Jacques Steinberg of The New York Times is with us, and we'll be back in a moment. I'm Lynn Neary, this is TALK OF THE NATION from NPR News.

This is TALK OF THE NATION. I'm Lynn Neary in Washington. The cost of tuition at most colleges and universities has jumped in recent years, even at state schools, which have traditionally have been more affordable. But while tuition rates go up, the average amount students pay in many cases is dropping. That's because of competition between schools and the financial aid packages being offered to more and more students. None of that changes the fact that college remains very expensive. This the time of year when high school seniors and their parents are making decisions on what school to pick and how to pay for it.

If you're facing these decisions, give us a call. What's your financial strategy? Cheaper schools, loans, your 401(k)? The number is 800-989-8255, email us talk@npr.org. Or join the conversation at our website, go to npr.org and click on TALK OF THE NATION.

We've been talking with Jacques Steinberg. He's the editor of The Choice blog at The New York Times. He's also the author of "The Gatekeepers: Inside the Admissions Process of a Premier College."

We're joined now also by Alisa Cunningham. She's with me in studio 3A, and she is the author the report "Delinquency: The Untold Story of Student Loan Borrowing," and she's a vice president of research and programs at the Institute For Higher Education Policy. Good to have you with us.

NEARY: So, now, you have done a report on student loans. Just tell us a little bit about that because a lot of families really need or have been depending on those loans, and yet I think your study is a bit of cautionary tale.

Ms. CUNNINGHAM: Yes, definitely. I think it's about 40 percent of undergraduates now who've taken a loan at a certain point. And so it's a really big issue that people need to take into account. What we were looking at - you hear a lot of stories in the news about default rates on student loans, and how they've been creeping up again, given the economy. We had an opportunity to do a study that looks at not just students who default on their loans, but also borrowers who are delinquent on their loans one or more time but do not default.

This something that's not captured in any of the data that we've seen before. And so, by looking at this kind of pretty shocked to find out that for every defaulter, there are two other borrowers that have become delinquent without defaulting.

NEARY: So explain what means; the difference between defaulting and delinquency and...

Ms. CUNNINGHAM: So, default in general means - in the case of student loans -that you're at least 270 days delinquent. And that means you go into default and for student loans in particular, there are serious consequences for that. You can't discharge the loan into bankruptcy. You may have your wages garnished, or other benefits garnished. They turn it over to collection agencies. It's really a very serious thing that you want to try to avoid.

Students who are delinquent, but don't default have, you know, some of the same issues in the sense that they will have something on their credit record showing that they have been delinquent and that can then impact their future borrowing - taking out an auto loan, or a mortgage or anything else.

NEARY: But they're continuing to pay.

Ms. CUNNINGHAM: Well, if they're delinquent, that's part of what we were looking at; students who were delinquent and not repaying. This was kind of snapshot of where they were. We also looked at students who were able to postpone their payments on their loans through deferment or forbearance, which is something that the lenders can help students with, so that they can postpone their loans if they're having a hard time. And so, we looked at that group too. And that was about a quarter of the students that we looked at.

NEARY: Now why, or how are student loans different from other loans? It seems like the terms of a student loan are a little tougher than some other loans. Why is that?

Ms. CUNNINGHAM: Well, part of it is, you know, when the federal government started this program there are wonderful things about federal loans. Oftentimes the rates and the terms of the federal loans are much better, for example, than a private loan. And it's guaranteed. You know that you can get it up to certain loan limits.

There are differences, and as I mentioned, part of that is that the loan can't be just dischargeable. There are other factors that - you know, the good parts of it are these options that the government has. You can take a whole bunch of repayment plans. You can do the standard 10-year repayment. They also let you extend it. They also let you do income-based repayment plans if you're eligible for it.

So there're a whole of series of options that the federal loans have that other loans may not have.

NEARY: Jacques Steinberg, despite the problems that we're talking about here, I mean, the loans remain a very important part of this package, financial package people may put together to get their kids through school. Don't they?

Mr. STEINBERG: It's absolutely going to be a reality for many, many families.

NEARY: Yeah. Let's take a call. We're going to go to Emily, and she is in Cape Cod, Massachusetts. Emily, welcome to TALK OF THE NATION.

EMILY (Caller): Hi.

NEARY: Hi.

EMILY: I'm calling because I wanted to let you know how much I appreciate you guys having this conversation. I think I would have found a lot of helpful information when I was 18. I'm 27. I have $168,000 in student loans for a bachelor's degree because I was sort of sold on this - I'm the first person in my family to go to college and when I graduated I was accepted to Emerson College and the state school. And my family really just put this emphasis on: go to the expensive school; everybody has loans. You got in, that means that, you know, you deserve it and you can finance it through Sally Mae student loans.

And it's really impacted my life. I have more loans than I know what to do with and I pay them, for the reasons that your expert mentioned. I value my credit, but I'm really back against the wall and I think that students need to know more about loans. I just wanted to let...

NEARY: Well, Emily, thanks so much for calling in. And I'm wondering, Alisa Cunningham - or Jacques - but Alisa Cunningham, I mean, you know, when somebody like Emily gets into this situation, what are here options?

Ms. CUNNINGHAM: I'm so sorry about the amount of your loan. It's really a difficult choice for parents and students as they're going through this to think about. I want to go to the best school, but on the other end you kind of take out these loans and it's hard to know what you're going to go into. Taking out that much debt is risky and it's difficult.

When you do have difficulties, I don't know if you've talked to your lender or seen if there are options. There are things you can do to postpone your loans temporarily so that you kind of get yourself back on your feet. So I would definitely explore that, if you haven't talked to them already, to talk to them about that. Because it's not just temporarily postpone, you can also restructure your loans, you can consolidate them, or you can change them into an income-based plan. There's all kinds of things that can be done. It's important to find out, so you can figure out which one works for you the best.

Mr. STEINBERG: But, Lynn, I want to pick up on something that Emily said that's really instructive for listeners; which is this notion in her family that private had to be better than state. And you got in, you earned it. You know, the government will provide and it will be worth it. I think that students today just can't afford today to sort of let the analysis rest there. They really have to be very, very savvy consumers about what is it that private college can provide, as compared to that state university, and can you justify the difference in tuition.

And, Emily, it sounds like if she could make that decision again today, it would be no contest; that she would have to seriously explore the state university. But it's a common mindset, private has to be better.

NEARY: Yeah. Thanks so much, Emily.

EMILY: Yeah. Thank you.

NEARY: OK, thanks for calling. And just while we're on that subject, I want to get a lot of people calling, so I want to get to them. But I've been surprised to learn that state universities are pretty - some of them are very expensive now too, more expensive than I realized.

MR. STEINBERG: I think that with state budgets being cut tuition is soaring, particularly at the California universities, I mean, to eye-popping levels. And there's also increasingly another alternative that Emily didn't mention. This idea of maybe if you went to community college for two years and then transferred to a four-year state university, you could really be hedging your bets. You would graduate with a bachelor's from a four-year college, but those first two years might have been substantially less expensive.

NEARY: But I think community colleges - don't they have something of a - they don't have the best image, let's say.

Mr. STEINBERG: But increasingly, particularly in states like California and Texas, there are very formal routes now from community college to four-year state colleges. So I think people have to take another look and some of that thinking may no longer be true.

NEARY: All right. Let's take a call from Susan. She's calling from Swansboro, North Carolina. Hi, Susan.

SUSAN (Caller): Hi. Thank you for taking my call. My husband and I were both educated in the University of North Carolina at Chapel Hill a long time ago. When we graduated separately we combined had total loans of about $18,000, and a great day was when we paid off those loans.

So, when it came time from our daughter to go to college, of course, Carolina was our first choice but her first choice as Wake Forest, which is an excellent school. She did get accepted at both. She wanted to go to Wake Forest; it's a smaller school. She felt more comfortable there. And she did get accepted. She did get offered $8,000 scholarship, annually renewable. But their annual tuition was like 42, $44,000.

And so, pretty much that was a drop in the bucket. And we were looking at basically a home mortgage amount for, you know, her and us at the end of four years, which we just couldn't do. And she had applied for numerous scholarships without any help.

We were a military family. We were looking to - going to be transferring overseas again. I was going to be out of work for an indefinite period of time again. The school wouldn't, you know, make any adjustment for that. They wouldn't, you know - they said, well, you know, when that happens, you can contact us and we can see if we can make some adjustment then. I said, by that time, she'll be in school. It'll be too late. I'll already have the obligation.

FAFSA, which to me is an absolute joke - I understand you have to go out to apply for your loans and scholarships and stuff, but they determined that we could spend - we could afford $26,000 a year for her education, not taking into account any consideration for mortgages, for insurance, for the fact that we had another child who was going to be going to college in two years. And there was no way we could afford $26,000 per year.

NEARY: All right. Susan, I think the situation that - you're describing a situation I'm sure lots of families are in. And I just want...

SUSAN: Yeah.

NEARY: ...Jacques and Alisa to weigh in on some of what you're dealing with. And thank you so much for calling and telling us your story. Thanks.

SUSAN: Thank you very much for listening.

NEARY: Okay. Jacques, again, this is pretty typical?

Mr. STEINBERG: It's - you know, first of all, she mentioned the FAFSA, the Free Application for Federal Student Aid, and at a great frustration she noted that it's going to come up with an expected family contribution. I believe she said $26,000 a year. It seemed completely unrealistic to her that her family could contribute that. And then there was - that disconnect is most certainly common.

NEARY: Yeah. And in this case - I mean, let me ask you, Alisa. I know that there are dangers - people can obviously get themselves into big trouble with student loans. We heard that young woman call with $168,000 in debt. And that's obviously very scary. But, so how should a person approach the idea of taking a loan? I mean, there must be some circumstances under which it is a good idea to take a loan.

Ms. CUNNINGHAM: Overall, I mean, we do know that students who end up getting a degree do better on average, and the problem is is not everybody does. It's really important for families to think about getting information while in high school - actually, even before that - to think about how they can do their research on various colleges.

And keep in mind that - don't just think of the colleges you know. Do some research. A lot of colleges now have on their website what they call net price calculators that can give you a good sense, or at least some sense of - not just of the sticker price, but also what will happen with aid.

And you - if you still find that you're going to have - a part of that is going to be loans, you really have to consider, how am I going to manage that? Will I be able to manage it for that college? Is there another one that will be able to get a good education at, but without that much in loans? So it's really a consideration that everybody has to think about.

NEARY: We're talking about paying for college, and you are listening to TALK OF THE NATION from NPR News.

And I want to read an email here from Gretchen in Wisconsin. And Gretchen writes: This past year, we paid fully for our son's education. But my husband just lost his job, and we're concerned about paying for next year. U.W. Madison is considered to cost 18,000 a year in state. FAFSA looks at last year's income, but we're at zero income at this point. We've been careful savers and are worried about spending savings on college tuition, and it's almost as if we're penalized because we have money in the bank. If we'd spent all our money frivolously, we'd be able to get help. Seems unfair - Gretchen in Wisconsin. Jacques?

Mr. STEINBERG: I certainly think there are people in every financial aid office who are appeals officers, who are specifically charged with hearing stories exactly like this one - change of circumstance, illness, job loss. So I think that this is one of those cases where there has to be a one-on-one conversation had and these circumstances disclosed.

And there is, I would presume at a school like the University of Wisconsin, some degree of wiggle room for appeal and some calculation of, you know, savings weighed against job loss.

NEARY: All right. Let's take a call now from Dina in Nashville, Tennessee. Dina, go ahead.

DINA (Caller): Hi. I am a parent of a young man who has some special needs issues. He has a mild form of autism. And none of the state schools or the community colleges in my region are capable of meeting his academic needs. He graduated with a 3.1 from his high school, so it isn't that he is incapable of learning. He just needs a highly specialized form of learning. And our state vocational rehabilitation system is so broken here that it will not provide for an out-of-state placement.

So, you know, I'm coming off of Social Security disability. I have a son who's on disability. And we're looking at $30,000 a year for a school that can meet his academic needs. And he's not in the minority. There are huge numbers of kids who are going to be able - unable to achieve a college diploma, not because of their inability, but because we simply can't finance the specialized programming they require.

NEARY: Alisa, do you want to weigh in on this one or...

Ms. CUNNINGHAM: I'm really sorry for your situation. I think that, you know, there's a lot of difficulties that different people have, and it's really hard when you have a system that, you know, it's a system that's written for overall, you know, and doesn't always take into account the special needs of special people. And not only like your son, but also you have a lot of students facing big barriers, whether language barriers or location barriers, all kinds of things that don't get necessarily taken into account.

And I don't necessarily have an answer except to say that, you know, reaching out to any of the information you can find from the state and federal government, looking and trying to find counselors at the high school and at the college themselves, they'll help. They try as much as they can. And hopefully, you'll be able to find somebody that will.

DINA: Well, we found a program that will meet his needs, but my family contribution on FAFSA is a donut hole. And we're going to still wind up having to fund at least $15,000 for him. And I, you know, I wound up having to try to solve the problem.

NEARY: Dina, thanks - Dina, we're going to have to go, but thank you so much for calling in. Appreciate it.

And thanks to my guests, as well, Jacques Steinberg, New York Times education reporter, and Alisa Cunningham, vice president of research and programs at the Institute for Higher Education Policy.

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